Indepth Exploration: When you invest in a Direct Participation Drillin...

Indepth Exploration:
When you invest in a Direct Participation Drillin...: When you invest in a Direct Participation Drilling Program it is required by law that you are furnished a full disclosure of the drilling ...

Indepth Exploration: Oil and Gas Investments (Direct Participation Pro...

Indepth Exploration:
Oil and Gas Investments (Direct Participation Pro...: Oil and Gas Investments (Direct Participation Programs) are considered to be a Non-Registered Securities (in most cases) and can only be s...

Indepth Exploration:

Indepth Exploration:

When you invest in a Direct Participation Drilling Program it is required by law that you are furnished a full disclosure of the drilling prospect. This information is provided in the Memorandum, a.k.a. Private Placement Memorandum, Confidential Information Memorandum or Prospectus. This memorandum should be provided to any investor that participates in a Joint Venture, General Partnership, Limited Partnership, Master Limited Partnership or Undivided Fractional Interest Ownership. In most cases the Memorandum is prepared by an attorney that has experience with Securities and Partnerships. Most qualified attorneys will charge between $8,000.00 and $15,000.00 to prepare an extensive Memorandum to the Issuer of the Drilling Program. In many cases, companies that make an offer of Direct Participation, do not prepare an adequate Memorandum for their potential investors and therefore do not fully disclose the necessary information that an investor needs to evaluate the entire offering. Not having a properly prepared Memorandum could be a legal issue for the company making the offer and thus leaving the investor exposed to legal issues with State Securities Agencies. In most states, the Securities Division requires that you submit a copy of the Memorandum to their offices within 15 days of the sale. (Blue Sky Registration) The Issuer also has to submit a copy of the Memorandum to the State Securities Agency in the State the offering is being made. This should be done before the offering is even made to a potential investor.

The following Sections, (Table of Contents) should be included in a properly constructed Oil and Gas Drilling Program Memorandum. Each section should include an in depth overview of that section's topic.

TABLE OF CONTENTS

Summary of the Offering 
Risk Factors 
Terms of the Offering 
Plan of Distribution 
Proposed Activities 
Additional Assessments 
Allocation of Interests 
Use of Proceeds 
The Initial Offerings 
Participation in Profits and Losses and Distributions 
Compensation and Benefits to the Managing Partner and its Affiliates 
Management 
Conflicts of Interest 
Prior and Current Activities of Managing Partner and Affiliates 
Responsibilities and Indemnification of the Managing Partner 
Tax Aspects 
Competition, Markets and Regulation 
Summary of the Partnership Agreement 
Other Matters 
Related Party Transactions 
Financial Condition of the Partnership 
Legal Proceedings 
Definitions

Exhibits: (these attachments are general in nature)

A Agreement of (Type of Partnership) 
B Geological Reports 
C Forms of the Turnkey Contracts 
D Form of Operating Agreement 
E Subscription Documents

A properly prepared Memorandum will always protect the Issuer who is making the offering, but it should also be fair to the investor. The Investor is the life-blood of any oil and gas company. Without the Investor, the company ceases to exist. Any well constructed Memorandum should be constructed to be fair to both parties involved in the drilling program.

It is unfortunate that many potential investors fail to read any of the material in the Memorandum before they purchase working interest in the program. Many companies are hoping that is the case, because they may have prepared a Memorandum that is inadequate as to "Full Disclosure". Alway remember, that when you sign the contracts, you are agreeing to all of the terms in the memorandum.

When you purchase Working Interest in a drilling program, make sure that the investment is registered with your State Securities Division. Remember that all companies are required to file a copy of the Memorandum with State Securities Agencies in your state within 15 days of your purchase. There are a few states that do not require this registration. The memorandum that is submitted will be scrutinized by that State Securities Agency, thus giving some validity to that Memorandum's construction. Ownership in Oil and Gas Wells can be extremely rewarding, but you must take your time and read the the Memorandum.

Duane Stephens
http://www.indepthexploration.com

Oil and Gas Investments (Direct Participation Programs) are considered to be a Non-Registered Securities (in most cases) and can only be sold by three different types of entities:

1. Broker/Dealers-That are registered with the Securities Exchange Commission/NASD 
2. Independent Oil and Gas Companies - Must be an Officer of the Company making the offer. 
3. Operators that are registered with state agencies - Cannot sell accross state lines - Intrastate only

Master Limited Partnerships are a fully registered Securities and are also used in direct participation programs. Fully registered Securities are expense and time consuming to prepare for an offering of a drilling program. This type of partnership is rarely seen. Most investments are structured under the guidelines of a non-registered Securities (Regulation D) Offering.

Filings must be made to State Securities Agencies in most states in the U.S. ( Blue Sky )

A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws vary among states, they all require the registration of all securities offerings and sales, as well as of stock brokers and brokerage firms. Each state's blue sky law is administered by its appropriate regulatory agency, and most also provide private causes of action for private investors who have been injured by securities fraud. Your state agency that regulates these offerings has to be notified within 15 days from the date of the sale by the issuer of these investments.

Direct Participation investments in drilling programs, require a fully disclosed Private Placement Memorandum, a.k.a Confidential Information Memorandum. This document must fully disclose all legalities associated with this type of investment and the individual drilling prospect being sold. A potential investor must see this information before purchasing working interest any drilling program. This is required, by Federal and State laws. A memorandum that has any validity should provide at least 80 pages of extensive information in regards to Securities Laws / Taxes / Overview of the Drilling Project and the Management of that offering. Turnkey Drilling and Testing and Completion Contracts, in addition to an Operator Agreement.

Simply put, never involve yourself with any offering in Direct Participation without this memorandum being offered to you for review before you sign any contracts to participate as a partner in the program. No exceptions. The investment would not be considered to be legal and your investment would be subject to a legal abyss. Direct Participation has risks when you drill wells, don't enhance that risk by investing into a poorly structured investment.

The above information is designed to give you some insight as to Oil and Gas Direct Participation Drilling Programs and is not intended to be legal advice. Consult your Tax Advisor or Attorney if needed.

Duane Stephens
Indepth Exploration LLChttp://www.indepthexploration.com